As reported by FOW, on May 1 ICE
changed the clearing and execution fees on Liffe by
slashing the cost of execution and hiking the cost of
The overall cost of 28p has been maintained but the headline
clearing fees have gone up from 3p to 20p and the headline
trading fee cut from 25p to 8p.
Arguments of what was behind the move have focused on
potential tax efficiencies to the need to move budgets
But on the face of it there doesn’t seem to be
any tax benefits from the move and the need to shift budgets
seems unlikely considering ICE has just shelled out billions of
dollars for Liffe.
Another possibility is that it constitutes a defensive move
against upcoming legislation to open up clearing houses.
Mifid II will (possibly, eventually, and in some form)
mandate CCPs to provide open access to execution platforms,
probably mandating cross margining between economically
ICE has not commented on the fee changes and "the Mifid II
defence" might simply be a consequence of its actions rather
than the root cause but the new fee structure will make it
very, very difficult for any execution venue to compete in an
open access environment.
Imagine you are an MTF offering say FTSE 100 futures and you
wanted to take advantage of open access by clearing within ICE
Clear Europe’s clearing pool offsetting against
positions on Liffe.
With clearing fees at 3p, you can drop your headline trading
fees to 15p, under-cut Liffe and still turn a decent
However, with the clearing fees at 20p, all going to ICE,
you only have 8p to undercut on the execution side. A few
pennies won’t make it attractive enough for firms
to invest in a new platform.
So while the overall cost of trading and clearing on Liffe
has been maintained by the fee change, the ability to launch
competition in an open access environment has been curtailed.
Near irrelevant today but possibly game-changing in a
post-Mifid II world.